Flying cash

Between 805 and 820 there was a shortage of copper cash coins which proved to be a hindrance for daily business transactions in the Tang dynasty. The creation of the Flying cash happened after a tax reform that allowed for the partial acceptance of taxes in money, which had increased the demand for currency which scared the government that merchants would remove cash coins from the capital to circulate so they ordered the local governments to set up monetary systems based on silk, other fabrics, and daily items akin to barter which hampered long-distance trade in the Tang dynasty and harmed the national economy. The people that had the largest benefit from the introduction of Flying cash were tea merchants and these merchant helped improve the trade between the capital and the regions.

Originally the government of the Tang dynasty was less than receptive to the idea of bills of exchange and had attempted banning them on multiple occasions, but in 812 Flying cash were officially accepted as a valid currency. After the government had accepted these bills the supervision of Flying cash was handled by the Ministry of Revenue (戶部), the Tax Bureau (度支司), and the Salt Monopoly Bureau (鹽錢司). Flying cash would remain in use until the early period of the Song dynasty.[2]

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Due to the inconvenience of transferring large amounts of the standard copper cash coins over large distances, the Tang government started to pay merchants with whom they did business in paper money. Before long, printed money became more common than minted coins for trading purposes.[3] Due to their tendency to fly away, the notes were dubbed "flying cash."[4][5]

Flying cash was never originally meant to be used as legal tender and, therefore, their circulation was limited. However, since they could be exchanged for hard currency at the capital with an exchange fee of 100 wén per 1000 wén, they were traded amongst merchants as if they were currency. It was not until the Song dynasty and subsequent Jin occupation that paper money was officially established as a legal tender. Eventually, the Song Dynasty began to issue more notes to pay its bills- a practice that ultimately contributed to runaway inflation.[3] The use of paper money spread westward through Mongol traders and, by 1661, European countries were printing paper currency.